TOKYO In a presentation beamed to Panasonic Corp offices around the world last week, company president Kazuhiro Tsuga stunned middle managers with the blunt message that their bonuses would be cut by more than a third.

A couple of hours later, he warned investors in Tokyo that Panasonic would lose close to $10 billion in the year to March as it writes down assets and restructures - taking cumulative losses at the 94-year-old firm to nearly $25 billion in five years. Tsuga branded the maker of Viera TVs a "loser" in consumer electronics.

Tsuga's move, and its execution, mark him out as a bold leader who is not averse to taking the tough decisions to turn around Panasonic. With local rivals Sony Corp and Sharp Corp, Panasonic is battling something of a death spiral of crushed demand in an anemic global economy, intense competition, a bloated business portfolio and weakened finances.

Karl Roberts, managing director at AlixPartners, said the mobile gadgets market, a near-duopoly of Samsung Electronics and Apple Inc, is a "winner take all business," but the hope for rivals is that product life cycles can turn over fairly quickly.

"The question for all companies who are not Apple or Samsung is what are their prospects for those distinctive market place developments. What everybody's after is how do we get to that durable success that companies such as Apple have achieved."

Tsuga, 55, who has a liking for muscular cars, preaches survival through tough love.

He warned his managers that businesses failing to earn margins of at least 5 percent would have no place in a re-modeled Panasonic, according to a person at the company who was not authorized to speak about the closed-door broadcast.

BOLD CHOICE

After a long career in research and development, Tsuga was appointed to his first senior managerial post only four years ago. That relative inexperience, along with his bluntness, could be among his trump cards, breaking the mould of a Japanese management culture that is reluctant to let individual businesses sink.

His promotion to the top job just four months ago is a bold move by Panasonic, which is Japan's biggest commercial employer with 300,000 staff churning out everything from light bulbs and bicycles to TVs, robotic hair washers and air conditioners. His ultimatum to kill off weak units and beat a path away from consumer electronics to household appliances, car batteries, solar energy and lighting, sets him on an alternative restructuring route to his rivals.

"Tsuga is an unusual person, and I mean that in a good way," said Tetsuro Ii, CEO of Commons Asset Management, a Tokyo-based fund which doesn't own Panasonic stock. "He looks like someone who can get things done."

SURVIVAL STRATEGIES

Under Kazuo Hirai, Sony is doubling down on consumer gadgets, building a future around cameras, games and mobile devices, while Sharp's new chief Takashi Okuda sees survival through convincing Apple and others to buy its advanced power-saving screens, and beefing up capital and customers through a tie-up with Taiwan's Hon Hai Precision Industry.

"Japan's consumer electronic makers were great in the 1990s and then lost it," said Mitsuhige Akino, chief fund manager at Ichiyoshi Investment Management in Tokyo. They all now face the same challenge: to restructure and "build products that will sell around the globe," he added.

Tsuga's house cleaning, including not paying a dividend for the first time in more than six decades, comes at a price.

Panasonic shares, already bumping along at multi-decade lows, slumped by almost a fifth on the huge loss forecast, wiping $3 billion off its market value and prompting Standard & Poor's to cut its credit rating to close to junk. On Tuesday, the stock touched its lowest since early 1975 - when Tsuga was still at college.

While the survival of Japan's three big TV makers is not guaranteed, Tsuga's no-nonsense approach to turning around a sprawling electronics giant has been well received by some, with Goldman Sachs reaffirming its 'buy' rating on Panasonic shares and JP Morgan analyst Yoshiharu Izumi saying the writedowns are a sign of a "major shift in corporate mindset".

OUTSIDER WITHIN

Tsuga joined Panasonic in 1979 with a degree in biophysical engineering, and was given the job of getting machines to talk with voice synthesizers. His first project was working on an electronic version of the Chinese board game, Go.

For the next 29 years, he was in research and development, building up a portfolio of patents, but developing little management experience. In 1986, he earned a master's degree in computer science from the University of California, Santa Barbara - and drove a Ford Mustang convertible, associates say.

His shift away from cloistered research centers began in 2003 when he was asked to lead talks with competitors and Hollywood studios on establishing a Blu-ray standard for DVDs.

"Tsuga honed the toughness that is indispensable to a manager," during that time, Noriko Fukuoka, an engineer who worked with him, said in a recent in-house magazine interview, adding that Tsuga can "come across as blunt".

DRIVING COST CUTS

In 2008, Tsuga was put in charge of automotive components - just months before the Lehman Brothers collapse tipped the global economy into recession and battered global car sales.

Tsuga's management inexperience was clear in those early days, said an executive who worked with him then. "He was not seen as someone pegged for the top," he added, asking not to be named due to the personal nature of his comments.

As orders dried up, Tsuga toured struggling automakers in the United States and Europe and, in a nod to Panasonic's biggest customer, he bought a Volkswagen Tiguan sport utility vehicle. His appeal, and a cost-cutting drive that eliminated a swathe of middle managers, returned his division to profit within a year. After a stepping-stone year heading the audiovisuals unit, where he shut plasma screen production lines, Tsuga had moved into pole position for the top job.

Installed behind the president's desk, with a large globe alongside, he swiftly slashed headquarter staffing to just 150 from 7,000 to speed up decision making. By April, he wants to have identified almost three dozen of Panasonic's 88 businesses for closure, sale or merger.

Seeking out low productivity units, Tsuga may tackle the industrial devices business, which includes semiconductors, switches and motors. It employs around a third of Panasonic's workforce but brings in only a fifth of sales.

Analysts say the 25 billion yen ($310 million) in cost cuts Tsuga has so far set out for next year aren't enough. He will have to at least quadruple that number, said Bank of America Merrill Lynch analyst Eiichi Katayama.

"We are waiting eagerly to see a demonstration of Tsuga's management capabilities."

(Additional reporting by Reiji Murai; Editing by Ian Geoghegan)

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